Paying off car balloon payment

SpaceJoe56

My car finance is about to end on 2 June 2025. I have to decide whether to pay off the balloon payment of about £10,000 or trade the car and take another PCP loan for a newer car. The car is a very nice Mercedes low milage worth about £17,000. I am likely to buy the same car again, but newer. My wife wants to keep the car and not take out another 3/4 year PCP loan. Should I just pay off the balloon payment? I will need to use my savings reserves which I am getting than 5% interest at the moment or should I take out a personal loan to pay the balloon payment? The best personal finance that I can find is about 9% interest.
Any suggestion or advice would help to make this important decision.

On-the-coast

Sounds like your wife is thinking financial good thoughts.
And it seems pretty obvious to take the money from your savings rather than a loan.
Best wishes with your decision (it's easy for me to write this)

On-the-coast

Oh... and if the figures are as you've said then don't leave that £7000 on the table either way! (either benefit from it yourself by keeping the car, or buy it and use it as trade-in.  It's not quite clear to me whether you realise that.  If you just hand it back you will not benefit from it.

Keep_pedalling

Even if you got a new PCP, it would be worth paying off the balloon payment and selling the car and pocketing the difference in value.

MikeJXE

Buy £17,000 for £10,000 seems like a no brainer to me 

DrEskimo

Pay with your savings and keep the Mercedes.

if you decide to change tomorrow, next month or next year or next decade, then go for it without any hassle of outstanding finance.

Exodi

Sounds like your wife would fit in well here.

Do you need to always be driving around in a brand new Mercedes? Think about how much more you'll be able to save by not paying a car loan every month. By staying in the circle of constantly taking out 3/4 year agreements against a new car, you will always be the person taking the hit for the massive depreciation new cars experience in their first few years of ownership. Most new cars will be worth roughly half of their original price after 5 years, with the biggest drop in value occurring within the first few years. Hence why, if you added it up (including the £10k balloon payment), you would have likely paid over £30k + a few grand in interest (depending on the rate) over the past few years for a car now worth £17k.

Borrowing at 9% so you can hold onto savings earning 5% makes no sense. But if you absolutely must have a brand new car again, as others have said, you should absolutely pay off the remaining £10k to own a car worth £17k, even if you intend to immediately sell it and pocket the £7k profit.

ManyWays

Pay with your savings and rebuild the savings with the monthly payments you are no longer making.  

SpaceJoe56

thank you all for your advise. I am just going to pay the £10k from savings and not go into another loan every month, just to driver a newer car. I can build up saving again and get to keep the car that we love. 

MikeJXE

Commonsense prevails as someone once said 

CliveOfIndia

SpaceJoe56 said:

I can build up saving again and get to keep the car that we love. 

Eminently sensible.  Similar questions crop up on here time and time again - "Is it better to take a loan or use my savings?".  Unless you can get a loan for less than what you're earning on your savings (highly unlikely) then it's a no-brainer.

And just doing the simple maths, if you pay back an amount each month to your savings equivalent to what you would have had to pay to a loan, you'll end up with more than £10k in your savings overall - because you'll effectively be paying yourself the 9% interest or whatever it is the loan would have charged.  Plus the interest you're earning on your savings on top